Md. Plant Caster Not Enough To Bail Out Steel, Analysts Say

February 03, 1986|by ROSS HETRICK, The Baltimore Evening Sun

With the startup of the continuous caster at Bethlehem Steel's Sparrows Point mill, the Baltimore County plant joins the ranks of the country's most efficient steel producers. But steel analysts say Bethlehem needs more than a new machine to pull it out of the red.

The $250-million caster, which was built in the last two years, began operating at the beginning of this month. The caster is able to take molten steel and make it directly into slabs in one continuous process.

The traditional method of steelmaking involved pouring molten steel into ingots, allowing then to cool, then reheating and shaping them into slabs.

Although the caster will be able to save Bethlehem $35 to $40 for each ton of steel it produces, analysts and union leaders say the company's fate depends on other factors such as labor costs, government control of imports and whether the steel market can manage an upturn.

The caster at Bethlehem Steel represents "major cost reduction and quality improvement," according to Charles Bradford, an analyst for Merrill Lynch. "Without casters, a major steel mill will not survive another five years," he said.

Even with this greater efficiency, however, high labor costs will continue to plague Bethlehem, he said. Even if Bethlehem manages to freeze its labor costs, it still will have "a very difficult time," he said.

He said steelworkers traditionally earned about one-third more than the normal industrial workers. Then, starting in the 1970s, this difference widened, and a steelworker now makes 61 percent more than the average industrial worker in the United States.

If steelworkers had been receiving their traditional one-third wage advantage, Bethlehem would have made a profit rather than losing money in 1984, Bradford said.

Bradford said labor costs can be reduced in a variety of ways besides cutting wages. Other ways include changing work rules, lowering the number of employees and altering benefits.

However, many union officials remain unconvinced that concessions will save the industry. "Any concessionary pact does not save jobs," said Donald E. Kellner, president of Local 2609 of the United Steelworkers of America. To save American steel companies will take modernization and help from the government in setting import restrictions, according to most observers.

The Reagan administration has sought voluntary quotas from the major steelmaking countries. But to date, these efforts have had little effect on the flow of imported steel, which has captured a quarter of the U.S. market.

"The government's solution is that everybody goes back to minimum wage," Kellner said. "Steelworkers do not make a lavish wage."

Even when labor costs have been cut, the price of steel has slipped, eliminating the advantage that the steel companies strived for, said William Hogan, an economics professor at Fordham University in New York City.

Hogan said another factor in anyrecovery for Bethlehem is whether there will be an upturn in the market for capital goods such as buildings and heavy equipment, which use a lot of steel. And now, with its continuous caster, "Bethlehem will be in a good position for any market that shows up," he said.

Besides labor costs, Bethlehem faces the problem of training workers to run and maintain the new equipment. In the last year, the company spent $19 million on training at Sparrows Point to get ready for the caster. "It was one of the most extensive training programs the company has been involved in," said Bethlehem spokesman G. Ted Baldwin.

But, with money short, Bethlehem is exploring ways to keep its training costs down, according to Philip R. Day, president of the Dundalk Community College. The college and Bethlehem Steel have worked closely in the training of Sparrows Point workers.

Now the college and Bethlehem have turned to the state government to help fund the training. The college recently received $20,000 from the Department of Economic and Community Development to teach Bethlehem workers in the areas of industrial maintenance, microprocessor applications, welding, digital logic and industrial electricity.

Day said the college and Bethlehem will apply for between $175,000 and $200,000 for training assistance during the state's 1987 fiscal year that begins July 1. Bethlehem expects the caster, which was built by the Austrian firm of Voest-Alpine AG, to reach full production after June. When it reaches its capacity, Bethlehem says, it will produce three million tons of steel slabs annually. The company hopes to save $35 to $40 on each ton of steel produced on the new caster. Besides making steel cheaper, the caster also will improve the quality of the finished steel, which Bethlehem's customers are demanding. Because less air reaches the steel during process, there are fewer imperfections.